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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Spekulatius who wrote (32897)	11/30/2008 12:57:38 PM
From: Spekulatius	Read Replies (1) \| Respond to of 78751

CMBS article from CNBC. cnbc.com Commercial real estate loans rated AAA for 14-16% !. The article leaves out how small grunts like me can invest in this. Are there bond funds or closed end funds out there that invest in this? Seems like a great opportunity - with the senior tranche you are first in the soup line if things default and get a piece of still valuable RE at distressed valuation. It's a great opportunity for go anywhere bond fund. Suggestions welcome.

To: Spekulatius who wrote (32897)	11/30/2008 1:15:42 PM
From: E_K_S	Read Replies (1) \| Respond to of 78751

Hi Spekulatius - Could the bond market offering such high yields be discounting for a much weaker dollar in the long term? Long term debit with yields much higher than the historical "normal" rate of return is the markets way of pricing in more risk, more potential defaults or perhaps a much weaker $US dollar in the future. I am not sure if long term rates are similar around the world or if other countries have as much exposure as the U.S. has in domestic corporate debt but these higher yields are flashing a red flag. It seems to me that with the FED pumping so much money in the system, the net long term effect should be much higher inflation and a relative weaker $US compared to other currencies. I suspect there are a lot of cross currents in the pricing system. These yields will only hold if there are significant defaults out in the future or the revenue streams (generated from the reals assets) significantly fall or the value of the dollar falls significantly. None of these outcomes are very good. The only other outcome I see is if this is just a temporary miss pricing of the underlying assets by the market making the relative bond yields much higher than the norm. It's possible that the expected shortfall in the future revenue streams are not really that bad and prices will rise bringing long term yields back to historical normal levels. As a value investor, you are always looking for the miss pricing scenario (with a minimal entry risk point). Speculating on the corporate debt may be one way to do this. Paul may be onto something looking to buy positions in long term corporate bond funds at current prices and yields. EKS

To: Spekulatius who wrote (32897)	12/8/2008 5:15:39 PM
From: Jurgis Bekepuris	Read Replies (1) \| Respond to of 78751

It is really funny though that with FED rates approaching 0 (Zero), the cost of capital is at 10-12-15% for REITs, companies, or even banks that want to get money from governments. This cannot last. Of course, credit markets are frozen, deleveraging is in full swing, and fear reigns supreme, but come on, the spread is ridiculous. At some point the money Fed keeps pumping into everything, should become available for loans and the cost of capital has to drop a lot. Yeah, I know inflationists will argue that we will skip from zero fed rate - 10-15% loan rates to 10% fed rates - 15% loan rates, without going through 0 fed rate - 5% loan rates, but IMHO this is unlikely. ;) I am not an expert in this though lol. :)